South Africa has officially entered into a recession after new figures released this morning by Statistics SA revealed that seasonally adjusted real GDP contracted by 6.4% in the first quarter of 2009.

The contraction follows a 1.8% decline for the final three months of 2008, marking the second consecutive quarter of growth – the definition of a recession.

The main cause for the slump in economic growth was due to a decline in the manufacturing industry, the mining and quarrying industry and the finance, real estate and business services industry.

Economists were quick to suggest that the figures would see the Reserve Bank make another 100 basis points reduction in interest rates, taking the repo rate from 8.5% to 7.5%. 

South Africa’s economy is expected to have bottomed out in the first quarter, with an improvement expected in the second quarter of the year – although Fin24 quoted economists as saying another quarter of negative growth was still possible.